Educational Articles

Mutual Fund Screen: Top-Performing Growth Funds, August 2013

Natalia Anikeyev and John D. Burke
| August 20, 2013

Value Line’s Growth objective group is by far the largest group under review.It is broadly constructed on purpose, taking into consideration any fund that has a primary objective of capital growth.Income can be a secondary objective.Weeded out are funds that follow more-specific mandates, such as capital growth by investing in small and mid-cap companies or sector-oriented funds.To fine-tune what is an extremely diverse grouping of funds, we use peer groups.

That said, why such a broad category?The main purpose is to put funds together that, by prospectus, are trying to do the same things.While it is important to view certain funds against smaller, similar groups, it is a mistake to take them completely out of the broader construct within which they operate.Investors should be keenly aware that a fund that is the best out of 20 or 30 specific peers may still be a laggard when compared to a broader group of competition.Unless such a fund is owned for a very specific reason, there would likely be better investment options.

Despite the objective’s title of Growth, this category can contain both growth- and value-oriented funds.In fact, there is a wide variety of funds here, spanning from the expected index funds all the way to focused funds that own just a handful of stocks.Managers can take any number of approaches to investing, too, including growth, value, growth at a reasonable price, socially focused, market-neutral, and tax-minimizing strategies, or, in some cases, a combination of these.

Over the long term, the Growth objective group has kept pace with the broader market, as measured by the S&P 500 Index. For the 10-year period ended July 31, 2013, the group had an annualized gain of 7.3%, while the S&P 500 also reported a return of 7.6%. For five years and three years, the group had annualized gains of 6.8% and 15.2%, respectively, while the S&P 500 reported increases of 8.2% and 17.7%, respectively.During the past year, both the Growth objective group and the S&P 500 reported a return of 25.0%. The group has an average Risk Rank of 3, indicating an average level of risk.

•Invests primarily in a broad range of equity securities without limitations on market capitalization. •May invest in securities of companies domiciled outside the United States, either directly or through American depositary Receipts. •The fund may invest a substantial portion of its assets in the stock of companies in one or more industries or industry groups of the economy that are typically not highly correlated with the overall market, such as the industry group consisting of biotechnology and pharmaceutical companies.

•Invests primarily in a diversified portfolio of common stocks traded on major US exchanges, markets and bulletin boards that the fund’s adviser believes present the most favorable potential for capital appreciation. •May invest in other equity securities, including equity real estate investment trusts, publicly-traded master limited partnerships and royalty trusts. •The Fund may invest directly in foreign equity securities traded on US exchanges, markets, and bulletin boards, or through American Depositary Receipts or Global Depository Receipts traded on US stock exchanges.

•Invests at least 80% of its net assets in domestic equity securities. •May invest up to 20% of its net assets in debt securities, including debt securities rated below investment grade, in comparable quality unrated securities that offer comparable yield and risk to those securities that are rated.

•May also invest up to 20% of its net assets in securities of foreign issuers that are not publicly traded in the United States, including depositary receipts. •The fund may invest extensively in investment-grade short-term securities.

In the table below, we have listed 10 top-performing funds through July 31, 2013 that we follow in The Value Line Fund Advisor’s database.

10 Top Growth Funds Performance

Fund Name

Ticker

% Year-to-date

Total Return

% 1 Month

Total

Return

% 3

Month

Total

Return

% 6 Month

Total

Return

% 5 Year

Total

Return

Annualized

Legg Mason Capital Management Opportunities A

LGOAX

42.21

8.09

12.17

27.89

Eventide Gilead Fund A

ETAGX

35.91

8.78

15.89

27.85

Biondo Focus Fund

BFONX

35.17

16.12

23.26

28.53

Auer Growth Fund

AUERX

31.47

5.14

14.10

22.17

-2.68

Diamond Hill Select Fund A

DHTAX

30.62

6.06

12.16

19.63

9.20

Sterling Capital Mid Value Fund A

OVEAX

29.82

5.61

9.01

18.97

12.17

NYSA Fund

NYSAX

29.80

9.83

21.04

26.19

-1.13

Snow Capital Opportunity Fund A

SNOAX

28.57

4.85

8.83

17.85

10.09

Pioneer Disciplined Growth Fund A

PINDX

27.95

6.22

16.96

22.35

8.56

J Hancock Classic Value A

PZFVX

27.65

4.45

9.58

18.05

7.59

Growth Objective Group

18.17

5.36

6.52

12.23

6.83

At the time of this article's writing, the authors did not have positions in any of the companies mentioned.